1996 (1) TMI 223 - AT - Customs

Summary

Issues Involved:
1. Classification of imported machinery and components under the Customs Tariff Act.
2. Applicability of Accessories (Conditions) Rules, 1963.
3. Determination of whether the imported items constitute a complete machinery or separate parts.
4. Relevance of Note (4) to Section XVI of the Customs Tariff Act.
5. Assessment of hydraulic supply and control system and other components.

Detailed Analysis:

1. Classification of Imported Machinery and Components:
The appellants imported a consignment described as "Principal's Swimming Roll and all accessories of Calender Stack of their machine No. II" to replace a worn-out 6-Roll Calender Stack paper machine with a more efficient 2-Roll Calender machine. The Assistant Collector initially classified the swimming roll and its accessories under Heading 84.31, while other equipment was classified under different headings, leading to excess customs duty. The appellants argued that the entire consignment should be classified under Heading 84.31 as machinery for making or finishing paper or paper boards.

2. Applicability of Accessories (Conditions) Rules, 1963:
The Assistant Collector erroneously applied the Accessories (Conditions) Rules, 1963, which are only relevant when the tariff heading does not provide for the assessment of components and spares. The assessment of parts of machinery under Chapter 84 is governed by Note (2) of Section XVI, not the Accessories (Conditions) Rules, 1963. Both lower authorities admitted that these rules do not apply in this case.

3. Determination of Complete Machinery or Separate Parts:
The appellants contended that the consignment constituted a complete machinery system for making or finishing paper, including the swimming roll, hydraulic system, and other components. The Collector (Appeals) incorrectly assumed that the machinery was a replacement of the existing calender stack and that the hydraulic system and rolls were ordered separately. The evidence showed that the entire machinery was supplied as a composite order, packed in seven cases for transportation.

4. Relevance of Note (4) to Section XVI:
The Collector (Appeals) wrongly concluded that Note (4) to Section XVI was relevant to the dispute. The correct interpretation, as pointed out by the appellants, is that the hydraulic system and swimming roll should be assessed as composite machinery under Heading 84.31, as they are integral parts designed to function together.

5. Assessment of Hydraulic Supply and Control System:
The Collector (Appeals) erred in concluding that the hydraulic system could function independently of the swimming roll. The catalogue and other evidence demonstrated that the hydraulic system was specifically designed for use with the swimming roll. Therefore, the hydraulic system and swimming roll should be classified together as machinery under Heading 84.31.

Conclusion:
The Tribunal concluded that the entire consignment should be reclassified under Heading 84.16, not Heading 84.31, due to the exclusion of calender rolls from Heading 84.31. The hydraulic supply and control system, swimming roll, and other components are integral parts for rebuilding the calender machine and should be classified together under Heading 84.16. The impugned orders were set aside, and the matter was remanded for reconsideration and reassessment in light of these findings, with an opportunity for the appellants to be heard.